#1
1. In economics, what does 'market equilibrium' refer to?
A state where supply equals demand
ExplanationBalanced state where the quantity supplied matches the quantity demanded.
#2
2. What happens in a market when there is a surplus of a good?
Prices decrease
ExplanationExcess supply leads to a reduction in prices.
#3
3. What is the term for a situation where quantity demanded exceeds quantity supplied in a market?
Market shortage
ExplanationInsufficient supply to meet consumer demand.
#4
4. How does the government intervene to establish price floors?
Setting a minimum price for a good
ExplanationGovernment-imposed minimum price to support producers.
#5
6. What is the main determinant of elasticity of demand?
Substitutability
ExplanationExtent to which a good can be replaced by another.
#6
7. In a competitive market, what is likely to happen if the price is set above the equilibrium price?
Shortage
ExplanationInsufficient supply at a price above the balanced level.
#7
11. What is the primary function of the price mechanism in a market economy?
To allocate resources efficiently
ExplanationEfficient distribution of resources based on price signals.
#8
12. How does the concept of 'disequilibrium' differ from 'equilibrium' in a market?
Disequilibrium refers to an imbalance between supply and demand
ExplanationState of imbalance where supply and demand do not match.
#9
5. In the context of market equilibrium, what does the term 'elasticity' refer to?
The responsiveness of quantity demanded to a change in price
ExplanationMeasure of how demand changes in response to price fluctuations.
#10
8. What role does the price mechanism play in achieving market equilibrium?
It adjusts prices to balance supply and demand
ExplanationAutomatic adjustment of prices to achieve equilibrium.
#11
9. What is the significance of the concept of 'invisible hand' in market equilibrium?
Natural forces guiding self-interest to promote the common good
ExplanationUnseen market forces aligning individual actions with societal welfare.
#12
10. How does technological advancement impact market equilibrium?
Both a and b
ExplanationInfluences both equilibrium price and quantity through innovation.
#13
13. What impact does an increase in consumer income generally have on the demand for normal goods?
Increase in demand
ExplanationRise in consumer income leads to higher demand for normal goods.
#14
14. How does the concept of 'price elasticity of supply' contribute to market understanding?
It measures the responsiveness of quantity supplied to a change in price
ExplanationQuantifies how supply adjusts to price changes.